Major economic challenges of Pakistan:

We are in dire need of a welfare state that meets basic needs in

 Education and health care.

 Housing and employment.

 Provides direct income support to the poor and the vulnerable.

 Reduces extreme income inequality.

 Shuns wasteful consumption and lavish expenditure.

many countries including the United Kingdom in the distant past and, more recently,
China and Brazil – have shown, it is possible to spread the gains of economic
development through social welfare measures that reduce poverty and inequality.
This, however, requires prudent economic management, reduction of wasteful
expenditures and the stamping out of widespread corruption. Most importantly, it
needs an honest, sincere and committed leadership that enjoys public confidence.

major challenges:

Foreign Exchange Reserves : ( macro economic unstability )

Need of the hour : sustainable macro economic sustainability

. While Pakistan has made significant improvement in peace and security in recent
years, its current macroeconomic situation is in a shamble. The country’s foreign
exchange reserves are precariously low at just over 12 billion US dollars (including
recent inflows from China) and would fund less than three months of imports. Our
unsustainable trade deficit reached almost 30 billion US dollars last year and a
spending spree by the outgoing government has pushed the budget deficit to over
seven per cent of the Gross Domestic Product (GDP), necessitating increased
borrowing from abroad and thus raising pressure on the current account deficit.

To overcome this crisis, the incoming government must try to increase foreign
exchange reserves

 whether through reaching an agreement with the International Monetary Fund

(IMF)
  by borrowing from friendly countries.

 by raising funds in global financial markets

 by curtailing non-development and wasteful expenditures. It must not agree to

any further devaluation of the Pak rupee.

 The impact of measures to stabilise the macroeconomy, which any lender will
certainly insist upon, will have an adverse impact on ordinary people, as
energy subsidies will need to be reduced to bring down the increasing circular
debt, which has now reached over seven billion US dollars. However, people
will likely be prepared to accept this spike in prices if they are assured of a
decline in line and delivery losses, a reliable supply of electricity and gas, and
minimal load-shedding. The incoming government must present in stark terms
the situation it has inherited and the need for these price adjustments in order
to ensure timely service delivery in the future. It is better to start early than
merely delay the inevitable.

Privitization (PIA and Pakistan Steel Mills and Pakistan Railways )

Restructuring the institution

Bringing all the stake holders on board

Reskilling programmes for displaced workers.

Increasing Exports :

export earnings currently pay for only 40 per cent of our import bill.

It can do so through arbitrary increases in tariffs on imports of a long list of goods

although taking such short-term measures to reduce the trade deficit does more harm
than good in the longer run. G

Given that Pakistan has lost its share in global markets in recent years, aggressively
marketing our exports may hold the key to solving the problem on a sustainable basis.

Encourage public private partnership

public-private partnerships should be encouraged to realise and finance a planned shift

towards ‘investing in people’ and increase the dismal amounts of money currently
spent on education, healthcare and housing. The tax-to-GDP ratio will also need to be
increased from around 11 per cent to 16 per cent over the next five years.

The government must adopt a carrot-and-stick policy, providing incentives to

taxpayers but coming down hard on those who deliberately avoid paying their due
taxes.

To conduct this exercise rationally and ensure a balance between badly needed
infrastructure — especially to replenish our shrinking water resources, meet our
growing energy needs and giving higher priority to human development, we will need
to resurrect our planning machinery. This must be done at the federal level and
(equally importantly) at the provincial and local levels. It is not just technical
competence that needs to be revitalised: we need to rebuild the confidence of our
economic and financial policymakers so that they can think independently and speak
their minds without fear or favour. They seem to have lost these abilities after many
years in which those in power have dictated their preferences and refused to tolerate
those who disagreed with them. The domineering influence of the World Bank and
other influential donors must be critically re-examined and evaluated while
recognising the need for benefiting from their expertise and global experience.

But this will require government support to rebuild the domestic industry that had
previously met similar demands and created jobs in the process. There is a real need
for the incoming government to come up with an industrial policy that halts
deindustrialisation and reignites an efficient and globally competitive industrial sector.
In doing this, we must not move backward to the now discarded import substitution
strategy of industrial growth but, instead, develop an export-oriented, competitive
domestic industry.

An aggressive skills training programme and a certification system for existing skills
must be started. Where existing programmes are functioning well, they must be
expanded. The government could consider giving to unemployed workers or those
who want to upgrade their skills government-funded vouchers to help pay for certified
skill training in schools and colleges. Job generation programmes must be calibrated
to meet the separate needs of the educated unemployed as well as those of skilled,
semi-skilled and unskilled workers. A well-thought-through active employment
agency could be set up under the human resources ministry, including an employment
exchange for the private sector that also operates online.

Earlier, only industry could boast of enjoying rapid technological change, new
innovations and the economies of large-scale production. In recent years, agriculture
too has been recognised as a leading sector for growth and development. Instead,
agriculture must realise its potential for sustained productivity and labour-absorbing
growth. An active-support policy for small farmers – one that concentrates not just on
credit and loans but also encourages the use of new seeds and technology and is
bolstered by a well-functioning and competent farmers’ decision support system –
should replace the existing arrangements.

The emphasis on industry and agriculture must be actively supplemented with a policy
framework to encourage the growth of new and dynamic sectors driven by technology
and innovative interventions. Information technology and tourism could be part of this
initiative.

The social welfare system will also need to be expanded to gradually extend the
current Benazir Income Support Programme to ensure a secure minimum income for
those living below the poverty line. In the meantime, extending and gradually
enforcing minimum wages in rural areas, in the informal economy and for domestic
workers could substantially improve the earnings of the poorer working classes.

Economic problems of Pakistan and their solutions.

Reasons for the Decline in Economy
1) Lack of continuity in economic policies, programs and projects
2) A wide gap between declared economic and social policies and their implementation
3) Security issues
4) Political Instability
5) Gradual decay of the institutions of democratic governance
* Politicization of civil services
* Accountability syndrome in honest officers
* Processes and procedures have become cumbersome and complex
* Access to basic services is unavailable without financial means or political connections
* Local governments have been disempowered and deprived of the authority
* Frequent judicial intervention in the executive and policy matters
6) National exchequer have faced gigantic losses because of the following
* Water losses in irrigation system from river inflows to farm gate
* Transmission and distribution losses from power station
* Road networks outside the national highway and main trunk roads is in poor condition
* Operations of railways and airline result in losses of billions of rupees annually.
Agenda for the sustained economic and social development, it can be divided into two parts; short term,
medium to long term.
1) Short Term Measures
*Accross the board institutional reforms
*Devolve administrative powers and financial resources to local governments
*Reduce budgetary deficits by bringing in two million tax-payers
* Adopt austerity measures
*Revamp laws and institutions of accountability, so that the honest and competent civil servants act fearlessly
* Reduce the trade imbalances by lowering the cost of production and logistics to make our export competitive
2) Medium and Long Term Measures
* Enhance the quality of exports by producing goods and services that are in heavy demand in the regional as
well as in international markets
*Invest heavily in Information and Communication Technology and Research and Development (ICT & RD)
* Promote vocational and skill training programs
* Take maximum advantage of country's strategic location
* Improve the maintenance and operations of the existing capital assets
* Introduce internationally accepted standers, certification and tests